Credicorp Ltd. Form 6-K Summary
Business Context and Reporting Period
This Form 6-K, filed on April 29, 2022, discloses a material event regarding an update to Credicorp Ltd.'s credit rating by Fitch Ratings. Credicorp is a Bermuda-based non-operating holding company and the largest financial holding company in Peru. Its primary operating subsidiary is Banco de Credito del Peru (BCP), which holds approximately 30% of the Peruvian banking system's assets. The company operates a diversified platform including banking, insurance, pension, and asset management across Peru and Bolivia.
Key Financial Metrics
The filing includes audited consolidated financial data as of December 31, 2021, and credit rating metrics from Fitch.
| Metric | 2021 Value | 2020 Value |
|---|---|---|
| Net Income | USD 921 million | USD 334 million |
| Total Operating Income | USD 3,586 million | USD 3,672 million (approx. PEN 13,379.5m) |
| Return on Average Equity (ROAE) | 14.26% | 1.35% |
| Return on Average Assets (ROAA) | 1.50% | 0.16% |
| Impaired Loans Ratio | 2.85% | 2.78% |
| Reserve Coverage | 201.7% | 258.2% |
| Double Leverage | 101.8% | 100.32% |
| Tangible Common Equity/Tangible Assets | 10.03% | 9.70% |
| Loans to Customer Deposits | 99.05% | 97.52% |
Credit Ratings (Fitch):
- Long-Term Foreign-Currency IDR: BBB (Stable Outlook)
- Short-Term IDR: F2
- Senior Unsecured Debt: BBB
Material Changes vs. Prior Period
Consolidated profitability has significantly improved in 2021 compared to 2020, recovering from the impact of the pandemic. Net income rose from USD 334 million in 2020 to USD 921 million in 2021. ROAE rebounded to 14.26% from 1.35%, and ROAA increased to 1.50% from 0.16%. This recovery is attributed to lower loan impairment charges in 2021 (USD 306 million) compared to the elevated charges in 2020 (USD 1,219 million). Asset quality remained stable with impaired loans at 2.85% of total loans, a slight increase from 2.78% in 2020, though reserve coverage decreased to 201.7% from 258.2%.
Outlook, Risks, and Management Commentary
Fitch maintains a Stable outlook on Credicorp's ratings, driven by the strong profile of its main subsidiary, BCP, and Credicorp's low double leverage (101.8%). Management emphasizes a strategy focused on efficiency, conservative risk management, and digital transformation to improve client experience. The company expects profitability to return to pre-pandemic levels by the end of 2022.
Risks and Sensitivities:
- Downgrade Risks: A material and sustained increase in double leverage above 1.2x, a weakening of liquidity management, or a reduction in dividend flows from subsidiaries could lead to a downgrade. The rating is also sensitive to a deterioration in Peru's operating environment or sovereign rating.
- Upgrade Risks: Ratings would move in tandem with positive actions on BCP.
- ESG Factors: Fitch notes minimal credit impact from ESG issues, though compliance risks regarding fair lending and data security are monitored.
Investor Verification Checklist
- Verify the sustainability of the 2021 profitability recovery (ROAE 14.26%) against pre-pandemic benchmarks.
- Monitor the trend in loan impairment charges and reserve coverage ratios, noting the decline in coverage from 258.2% to 201.7%.
- Assess the stability of dividend flows from BCP, which constitute the bulk of Credicorp's liquidity.
- Track Peru's sovereign credit rating and political stability, as these are key drivers for Credicorp's rating.
- Confirm that double leverage remains below the 120% threshold cited by Fitch as a risk trigger.